Organisation of Commerce and Management वाणिज्य संघटन व व्यवस्थापन

Quick summary

Principles of management are general guidelines that help managers take decisions and run an organisation well. This chapter explains their nature and significance, and two classical theories: Henri Fayol's 14 principles of administrative management and F. W. Taylor's scientific management with its principles and techniques.

Key points

• Principles of management are flexible general guidelines formed by practice and experiments; they are behavioural in nature, show cause-and-effect relationship and have universal application.
• Significance: useful insight to managers, efficient use of resources, scientific decisions, understanding social responsibility, encourages R&D, helps coordination and control, develops an objective approach.
• Henri Fayol (French) — "Father of Modern Management" (administrative theory). His 14 principles: division of work, authority and responsibility, discipline, unity of command, unity of direction, subordination of individual interest to general interest, remuneration, centralisation, scalar chain, order, equity, stability of tenure, initiative, esprit de corps (team spirit).
• F. W. Taylor (1856–1915, American) started as a machinist at Midvale Steel Works and became chief engineer — "Father of Scientific Management".
• Taylor's definition: scientific management is knowing exactly what you want men to do and seeing that they do it in the best and cheapest way.
• Principles of scientific management: science not rule of thumb; harmony not discord; cooperation not individualism; development of each person to greatest efficiency; equal division of responsibility between management and workers; development of employer and employees for maximum prosperity.
• Techniques: work study (time study, motion study, method study, fatigue study), standardisation, functional foremanship, differential piece-wage system, scientific selection and training.

Important terms

• Unity of command – each employee gets orders from only one boss.
• Unity of direction – one head and one plan for a group of activities with the same objective.
• Scalar chain – chain of superiors from top to bottom; gang plank allows direct contact in emergency.
• Esprit de corps – team spirit; 'union is strength'.
• Functional foremanship – separate specialists supervise workers in different functions.

Important dates and people

• Henri Fayol – 14 principles of management (administrative theory).
• F. W. Taylor (1856–1915) – scientific management.
• Other thinkers named in the textbook: Elton Mayo.

5 important questions

Q1. Explain any four features of principles of management.

Universal application; flexible; based on practice and experiments; cause-and-effect relationship.

Q2. Explain Fayol's principles of unity of command and unity of direction.

Unity of command: one subordinate, one superior, to avoid confusion. Unity of direction: one plan and one head for activities with the same goal.

Q3. State any four principles of scientific management.

Science not rule of thumb; harmony not discord; cooperation not individualism; development of workers to maximum efficiency.

Q4. Explain the techniques of work study.

Time study fixes standard time for a job; motion study removes unnecessary movements; method study finds the best method; fatigue study fixes rest intervals.

Q5. Distinguish between Fayol and Taylor (two points).

Fayol focused on top-level administration and general principles; Taylor focused on the shop-floor and workers' efficiency through scientific methods.

Exam tip

Learn all 14 principles in order using the first letters, and give a one-line example for each in long answers.

Quick summary

Management is performed through a set of functions: planning, organising, staffing, directing, co-ordinating and controlling. This chapter explains the meaning and importance of each function and how they are linked to each other in a continuous process.

Key points

• Planning: deciding in advance what to do, how, when and by whom. It is the basic and first function. Importance: clear objectives, path of action, better performance, reduces risk, optimum use of resources, helps decision-making, sets standards for control, promotes innovation.
• Organising: identifying and grouping activities, assigning duties and delegating authority. Importance: specialisation, clear jobs, clear authority and responsibility, co-ordination, helps growth and diversification, optimum use of resources.
• Staffing: attracting, recruiting, selecting, training, developing and retaining the right person for the right job. Importance: efficient use of human resources, cordial relations, job satisfaction, improved efficiency.
• Directing: called the "soul of management"; guiding, supervising, motivating, leading and communicating with employees. Elements: supervision, motivation, leadership, communication.
• Co-ordinating: integrating the efforts of different departments and people to achieve common goals. Mary Parker Follett called co-ordination the 'plus value of the group'. It is called the 'essence of management'.
• Controlling: checking actual performance against standards and taking corrective action. Steps: set standards, measure performance, compare, find deviations, take corrective action.
• Planning and controlling are closely related: planning sets standards, controlling checks them ("planning without control is meaningless").

Important terms

• Delegation – passing authority to a subordinate.
• Motivation – inspiring employees to work willingly.
• Leadership – ability to influence people towards goals.
• Deviation – difference between planned and actual performance.

Key facts

5 important questions

Q1. Define planning and explain its importance (any four points).

Planning is deciding in advance what is to be done. It sets objectives, reduces risk, ensures optimum use of resources, and provides standards for control.

Q2. Why is directing called the soul of management?

Because it starts actual work: it guides, motivates and leads people. Without directing, plans and organisation remain on paper.

Q3. Explain the importance of staffing.

Right person at the right job, better use of human resources, job satisfaction, cordial relations and higher efficiency.

Q4. Explain the steps in the controlling process.

Establish standards; measure actual performance; compare with standards; find deviations; take corrective action.

Q5. "Co-ordination is the essence of management." Explain.

All functions need co-ordination to unite the efforts of departments and people towards common goals; without it, work becomes scattered.

Exam tip

For 'justify' questions, write the meaning of the function first and then give 3–4 points of importance.

Quick summary

An entrepreneur is a person who starts a new business, bears risk and brings new ideas. This chapter explains the history, concept and definitions of entrepreneur, the characteristics, qualities and functions of an entrepreneur, the meaning and process of entrepreneurship development, recent government initiatives (Start-up India, Stand-up India, Agro Tourism) and the idea of an intrapreneur.

Key points

• The word 'entrepreneur' comes from the French verb 'entreprendre' meaning 'to undertake'.
• Early 16th century: used by the French for leaders of military expeditions; around 1700 for contractors/architects; early 18th century applied to business by French economist Richard Cantillon; in 1848 J. S. Mill described entrepreneurship as founding a private enterprise.
• Entrepreneur is called the fourth factor of production (with land, labour and capital); creates jobs and drives economic growth.
• Qualities: intellectual ability, future vision, hard work, technical knowledge, communication skills, optimism, risk-bearing capacity, self-confidence, discipline, creativity, determination, passion.
• Functions: innovation, deciding objectives, developing the market, adopting new technology, maintaining good relations, organising funds, taking decisions.
• Entrepreneurship Development Programme (EDP) trains people to start and run enterprises; it helps generate employment and develop backward areas.
• Start-up India (launched 2016): a start-up is an entity with headquarters in India, incorporated less than 10 years ago, with annual turnover below ₹100 crore.
• Stand-up India: bank loans between ₹10 lakh and ₹1 crore to at least one SC/ST and at least one woman borrower per bank branch for a greenfield (first-time) enterprise; borrower above 18 years; composite loan up to 75% of project cost.
• Agro tourism: bringing urban people to farms to experience rural life; gives farmers extra income.
• Intrapreneur: an employee who acts like an entrepreneur within the organisation, developing new ideas and products.

Important terms

• Entrepreneurship – the process of starting and running a new venture by taking risk.
• Innovation – introducing new products, methods or markets.
• Greenfield project – a first-time new venture.
• EDP – programme to develop entrepreneurial skills.

Important dates and people

• Richard Cantillon (18th century) – applied the term to business.
• J. S. Mill (1848) – entrepreneurship as founding a private enterprise.
• 2016 – Start-up India launched.

5 important questions

Q1. Explain the meaning of entrepreneur.

A person who starts a business, undertakes risk, organises factors of production and introduces innovation to earn profit.

Q2. Explain any four qualities of a successful entrepreneur.

Risk-bearing capacity, future vision, self-confidence and creativity.

Q3. Explain the functions of an entrepreneur.

Innovation, deciding objectives, developing market, using new technology, raising funds, decision-making.

Q4. State the objectives / features of the Stand-up India scheme.

To promote entrepreneurship among SC/ST and women by giving bank loans of ₹10 lakh to ₹1 crore for greenfield enterprises in manufacturing, services or trading.

Q5. Who is an intrapreneur?

An employee who thinks and acts like an entrepreneur inside an existing organisation, creating new ideas without bearing the full risk.

Exam tip

Remember the definitions with numbers — Start-up (less than 10 years, turnover under ₹100 crore) and Stand-up (₹10 lakh to ₹1 crore) — they appear in fill-in-the-blanks.

Quick summary

Business services are services that help a business run smoothly — banking, insurance, transport, warehousing and communication. This chapter explains the meaning and features of services, types of banks and functions of commercial banks, e-banking, principles and types of insurance, modes of transport, warehousing and communication.

Key points

• Features of services: intangibility, inseparability, inconsistency, perishability, non-transferability, consumer participation.
• Banking: types of banks — Central Bank (RBI), commercial banks, co-operative banks (three tiers: primary credit societies, district central co-operative banks, state co-operative banks), industrial development banks, exchange banks, regional rural banks, savings banks, investment banks, specialised banks (EXIM Bank, SIDBI, NABARD), small finance banks and payments banks.
• Functions of commercial banks: primary (accepting deposits — savings, current, fixed, recurring; granting loans — overdraft, cash credit, loans, discounting bills) and secondary (agency functions and utility functions).
• E-banking: ATM, debit/credit cards, internet banking, mobile banking, NEFT, RTGS, IMPS, UPI.
• Insurance: a contract in which the insurer promises to compensate the insured for loss in return for a premium.
• Principles of insurance: utmost good faith, insurable interest, indemnity, contribution, subrogation, causa proxima (proximate cause), mitigation of loss.
• Types: life insurance, marine insurance, fire insurance (and others like health, motor).
• Transport removes the hindrance of place. Modes: land (road, rail, pipeline), water (inland, coastal, ocean), air.
• Warehousing removes the hindrance of time. Types: private, public, bonded, government, co-operative warehouses; functions — storage, price stabilisation, risk bearing, financing, grading and packing.
• Communication: oral, written, visual, and modern electronic modes (email, mobile, video conferencing).

Important terms

• Premium – amount paid by the insured to the insurer.
• Policy – document containing the insurance contract.
• Indemnity – compensation only up to the actual loss (not for life insurance).
• Bonded warehouse – warehouse for imported goods on which customs duty is not yet paid.
• Subrogation – after paying the claim, the insurer gets the rights of the insured over the damaged property.

Key facts

• Life insurance is a contract of assurance (death or maturity is certain); fire and marine insurance are contracts of indemnity.
• NEFT, RTGS and IMPS are electronic fund transfer systems in India.

5 important questions

Q1. Explain any four features of services.

Intangible (cannot be touched), inseparable (produced and consumed together), perishable (cannot be stored), inconsistent (quality varies).

Q2. Explain the primary functions of commercial banks.

Accepting deposits (savings, current, fixed, recurring) and granting loans and advances (loans, overdraft, cash credit, discounting of bills).

Q3. Explain any four principles of insurance.

Utmost good faith — disclose all facts; insurable interest — must suffer loss from the event; indemnity — compensation up to actual loss; subrogation — insurer gets rights after paying claim.

Q4. State the functions of warehouses.

Safe storage, price stabilisation, risk bearing, financing against warehouse receipts, grading and packing.

Q5. Explain the types of e-banking services.

ATM, internet banking, mobile banking, debit/credit cards, NEFT, RTGS and UPI transfers.

Exam tip

Insurance principles are frequently asked — give a one-line example for each principle.

Quick summary

Technology has created new ways of doing business. This chapter explains e-business — its meaning, scope, benefits and limitations — the steps of an online transaction, and outsourcing, including Business Process Outsourcing (BPO), Knowledge Process Outsourcing (KPO) and Legal Process Outsourcing (LPO).

Key points

• E-business (electronic business) means using the internet and IT to carry out business activities and connect customers, suppliers and employees. IBM first used the term in 1997.
• E-commerce (buying and selling online) is a part of e-business; e-business is wider.
• Scope of e-business: B2B (business to business), B2C (business to consumer), C2C (consumer to consumer), C2B (consumer to business), intra-B (within a business), B2G/G2B (business and government).
• Benefits: easy to start, low investment, convenience (24×7), speed, global reach, lower cost, paperless working, support for small businesses.
• Limitations: lack of personal touch, security and privacy risks, technology dependence, delivery delays, frauds, digital divide.
• Steps in online transaction: registration → placing an order (shopping cart) → payment (cash on delivery, cheque/DD, net banking, debit/credit card, digital wallet, UPI) → delivery.
• Outsourcing: getting some business activities done by outside agencies on contract, so the company can focus on its core work.
• Need/advantages: focus on core activities, cost saving, expert services, efficiency, better quality, flexibility, quick service.
• Disadvantages: loss of control, threat to confidentiality, dependence on outsiders, job losses in the company, communication gaps.
• BPO: outsourcing of routine processes like call centres, customer support, payroll. KPO: outsourcing of knowledge-based work needing expertise (research, analytics, legal, medical). LPO: outsourcing of legal work like drafting, contracts, patents.

Important terms

• Shopping cart – online record of items selected by a buyer.
• Cash on delivery – payment made when goods are delivered.
• Core competency – the main strength or activity of a business.
• KPO – outsourcing of high-skill, knowledge-based processes.

Key facts

5 important questions

Q1. What is e-business? State its scope.

Doing business activities with the help of the internet and IT. Scope: B2B, B2C, C2C, C2B, intra-business and business–government transactions.

Q2. Explain any four benefits of e-business.

Easy formation and low investment; convenience — open 24×7; speed of transactions; global reach.

Q3. Explain the steps in an online transaction.

Registration on the website; placing the order in the shopping cart; choosing a payment method; delivery of goods.

Q4. State the advantages of outsourcing.

Focus on core work, lower costs, access to experts, better efficiency and quality.

Q5. Distinguish between BPO and KPO (any three points).

BPO handles routine processes, needs basic skills, gives lower value; KPO handles knowledge work, needs specialised experts, gives higher value.

Exam tip

Learn the steps of an online transaction in the correct order — 'registration' always comes first.

Quick summary

A business uses society's resources, so it has duties towards society. This chapter explains the concept and need of social responsibility, responsibilities towards owners, investors, employees, consumers, government and the community, protection of the environment, business ethics, and Corporate Social Responsibility (CSR) under the Companies Act, 2013.

Key points

• Social responsibility = obligation of business management to protect and promote the interest of society, not just earn profit.
• Need: business is part of society, uses society's resources, public image, government regulation can be avoided, long-term survival, moral justification, power brings responsibility.
• Towards owners: fair return, safety of capital, growth, efficient management.
• Towards investors: regular interest/dividend, safety of investment, correct information.
• Towards employees: fair wages, safe working conditions, training, welfare, job security, participation in management.
• Towards consumers: good quality at fair price, no adulteration or black marketing, correct information, after-sales service, handling complaints.
• Towards government: pay taxes honestly, obey laws, support government policies.
• Towards community: generate employment, help backward areas, avoid pollution, support social welfare.
• Environment: control air, water and noise pollution; use eco-friendly technology; recycle; conserve resources.
• Business ethics: moral principles that guide business behaviour — what is right and wrong. Features: based on moral and social values, voluntary, gives protection to society, builds trust, relative (varies with time and place).
• CSR: Section 135 of the Companies Act, 2013 and CSR Rules, 2014 made it mandatory from April 2014 for eligible companies to spend on social welfare (at least 2% of average net profit of the last three years).

Important terms

• Stakeholders – groups affected by the business: owners, employees, consumers, government, society.
• Business ethics – right conduct in business.
• CSR – a company's responsibility to contribute to social and environmental goals.

Important dates and people

• Companies Act, 2013, Section 135 – CSR.
• CSR Rules, 2014 – CSR made mandatory for certain companies.

5 important questions

Q1. What is social responsibility of business?

The obligation of business to work in ways that protect and improve the welfare of society along with earning profit.

Q2. Explain the responsibility of business towards consumers (any four points).

Quality goods at reasonable prices; no adulteration; true information in advertisements; proper after-sales service and complaint handling.

Q3. Explain the responsibility of business towards employees.

Fair wages, good working conditions, training and promotion opportunities, welfare facilities and job security.

Q4. Explain any four features of business ethics.

Based on moral values; voluntary in nature; protects society; builds goodwill and trust.

Q5. What is CSR?

Corporate Social Responsibility — under Section 135 of the Companies Act, 2013, eligible companies must spend on social welfare such as education, health and environment.

Exam tip

For 'responsibility towards' questions, write the group name as a heading and give four clear points each.

Quick summary

Consumers are often cheated by high prices, adulteration, short weights and misleading advertisements. This chapter explains who a consumer is, the need for consumer protection, consumers' rights and responsibilities, ways of protecting consumers, the Consumer Protection Act, 2019 with its three-tier redressal system, and the role of consumer organisations and NGOs.

Key points

• 'Consumer' comes from the Latin word consumere — to eat or to drink. A consumer buys goods or hires services for personal use, not for resale.
• Mahatma Gandhi: the customer is the most important visitor on our premises.
• Need: protect consumers from exploitation (price rise, artificial scarcity, black marketing, adulteration, misleading ads), illiteracy and ignorance, unorganised consumers, spread of awareness, social responsibility of business.
• 15 March is World Consumer Rights Day — on 15 March 1962 U.S. President J. F. Kennedy declared consumer rights.
• Rights of consumers: right to safety, information, choose, be heard, consumer education, represent, redress, healthy environment, protection from unfair practices, and against spurious goods.
• Responsibilities: be aware, buy standard marked goods (ISI, Agmark, Hallmark), insist on a cash memo/bill, read labels, file genuine complaints, avoid wastage, be honest.
• Ways and means: self-help, legal measures, public interest litigation, redressal forums, consumer organisations, government measures, business associations.
• Consumer Protection Act, 2019 received the President's assent on 9 August 2019. It set up a three-tier quasi-judicial machinery: District Commission, State Commission, National Commission.
• Monetary limits as printed in the textbook: District – up to ₹1 crore; State – above ₹1 crore up to ₹10 crore; National – above ₹10 crore. (These limits were later revised by 2021 rules to ₹50 lakh, ₹2 crore and above ₹2 crore — follow your teacher on which to write.)
• Appeals: District → State (within 45 days) → National (within 30 days) → Supreme Court (within 30 days).
• Other laws: Bureau of Indian Standards Act, Food Safety and Standards Act 2006, Essential Commodities Act etc.

Important terms

• Consumer – person who buys goods or hires services for own use.
• Adulteration – mixing cheap or harmful material in goods.
• Redressal – remedy or compensation for a complaint.
• Public Interest Litigation (PIL) – case filed in court in the interest of the public.

Important dates and people

• 15 March 1962 – J. F. Kennedy declares consumer rights (World Consumer Rights Day).
• 9 August 2019 – Consumer Protection Act, 2019 gets assent.

5 important questions

Q1. Explain any four rights of consumers.

Right to safety from hazardous goods; right to information about quality, price and quantity; right to choose among varieties; right to redress for defective goods or poor service.

Q2. State any four responsibilities of a consumer.

Buy standard marked goods; take a proper bill; read labels and instructions; file complaints for genuine grievances.

Q3. Explain the three-tier redressal machinery under the Consumer Protection Act, 2019.

District Commission at district level, State Commission at state level and National Commission at the national level, each handling complaints up to set monetary limits, with appeals upward.

Q4. Why is consumer protection needed?

To stop exploitation through adulteration, black marketing and misleading ads, because consumers are unorganised and often unaware.

Q5. State the role of consumer organisations and NGOs.

Create awareness, publish product tests, guide consumers, file complaints and PILs on their behalf.

Exam tip

Write the Act's year (2019), assent date and the names of the three commissions exactly — they are common one-mark questions.

Quick summary

Marketing is much more than selling — it starts with finding out what consumers need and ends with their satisfaction. This chapter explains the meaning and definitions of marketing, concept and types of market, importance and functions of marketing, and the marketing mix (4Ps).

Key points

• Marketing is a social and business process of identifying consumer needs and satisfying them through the exchange of goods and services. It is both an art and a science.
• Market (from the Latin mercatus) is a place or arrangement where buyers and sellers deal; today it includes online markets.
• Types of market: by area (local, regional, national, international), by time, by nature of goods (commodity, capital, money markets), by nature of transactions (spot, future), by volume (wholesale, retail), by competition.
• Importance: helps consumers get goods, raises standard of living, creates employment, helps product development and innovation, tackles competition, increases sales and profit, helps the economy.
• Functions: marketing research, buying and assembling, product planning and development, standardisation and grading, packaging and labelling, branding, pricing, promotion (advertising and sales promotion), storage/warehousing, transportation, distribution, financing, risk bearing, after-sales service.
• Marketing mix (4Ps): Product, Price, Place, Promotion — the controllable factors used to satisfy target customers.
• Product: features, quality, brand, packaging. Price: cost, competition, demand. Place: channels of distribution. Promotion: advertising, personal selling, sales promotion, publicity.

Important terms

• Marketing research – collecting and analysing information about consumers' needs.
• Branding – giving a name, sign or symbol to a product.
• Grading – sorting goods into classes by quality.
• Channel of distribution – route through which goods move from producer to consumer.

Key facts

5 important questions

Q1. Define marketing.

Marketing is the process of identifying consumer needs and satisfying them by making goods and services available through exchange, at a profit.

Q2. Explain the importance of marketing (any four points).

Raises standard of living; creates jobs; helps develop new products; helps face competition.

Q3. Explain any four functions of marketing.

Marketing research finds consumer needs; packaging protects and attracts; branding identifies the product; pricing fixes a suitable price.

Q4. What is the marketing mix? Explain the 4Ps.

The combination of Product, Price, Place and Promotion used by a firm to satisfy customers.

Q5. Distinguish between marketing and selling (two points).

Selling focuses on the seller's need to convert goods into cash; marketing focuses on the buyer's needs. Selling starts after production; marketing starts before production.

Exam tip

In long answers on functions of marketing, write at least six functions with a one-line explanation each.